Belt-Tightening at Two Foundations Puts the Squeeze on Charities

Plummeting stock values not only have left many foundations with less money to give away, but in some cases have prompted them to trim their staffs and narrow their grant making as well.

As a result, many of their longtime grantees are scrambling to find new sources of support.

The precipitous decline in the price of AOL Time Warner shares, for example, has severely curtailed giving by Ted Turner, who had pledged to donate $1-billion over 10 years to finance the United Nations Foundation and $250-million over five years to underwrite the Nuclear Threat Initiative.

The value of Mr. Turner’s shares in AOL Time Warner has shrunk to about $1.6-billion from nearly $7.5-billion last year, however, and he now says he will stretch those gifts over several additional years, thereby reducing the amount he contributes in a single year.

Other painful adjustments have been made at the Turner Foundation, through which Mr. Turner has given additional millions, mostly to efforts involving conservation or curbing population growth. The foundation has announced that it will not consider any new requests for funds next year but will only make payments on its previous commitments. In 2004, it will begin awarding grants again to selected organizations, but will no longer solicit applications from other groups.

“This is just a very sad time for this foundation and its board,” said Michael Finley, the foundation’s president. “The sad irony is that the need for philanthropy has never been greater, and our ability is constrained by forces beyond our control. It’s very frustrating for all involved.”

The foundation, which has trimmed its staff from 19 people to six, this year will give away only about half of the nearly $70-million it made in grants last year.

“We pretty much know after 11 years the groups that the trustees are comfortable with,” Mr. Finley said. “With our reduced staff, we are not capable of inviting or evaluating thousands of prospective grants.”

Packard Foundation

The David and Lucile Packard Foundation has also slashed its grant making: It says it will give away about $200-million next year, compared with $250-million this year and $450-million last year. The change comes as a result of a drop in its endowment from some $13-billion in 1999 to below $4-billion today. Most of its holdings are in Hewlett-Packard stock, which has plunged in value.

The foundation will reduce its staff by as much as half — from 160 people to between 80 and 110 or so by year’s end.

Packard, a family foundation, says it plans to continue supporting longtime interests of its trustees, including the Monterey Bay Aquarium Research Institute, the Lucile Salter Packard Children’s Hospital, the Packard Fellowships for Science and Engineering Program, and community grants in Pueblo, Colo.

But next year it will drop two of its main grant-making program areas — supporting the arts and organizational effectiveness and philanthropy — and collapse its separate science and conservation programs into one, while retaining its programs that make grants to deal with population control and providing assistance to groups that serve children, families, and neighborhoods.

Reputation for Innovation

Packard and Turner grant recipients lament the shrinking of two relatively new philanthropies that had gained reputations for doing innovative grant making.

The Global Fund for Women, in San Francisco, has received support from both foundations for its work to improve reproductive health. This year it received a two-year $130,000 grant from Turner and a $200,000 grant from Packard, said Maitri Morarji, a development officer at the Global Fund for Women, which raises about $8.4-million a year.

About three-quarters of that sum comes from the fund’s 300 institutional supporters, and the rest from individual donors, Ms. Morarji said. Because of continuing softness in its institutional support, the Global Fund for Women has been conducting major direct-mail campaigns in hopes of increasing the number of active individual donors from 3,900 to 5,100 this year — and is on pace to reach that goal, says Nicky McIntyre, vice president for development and communications.

Among Turner’s grantees has been the Institute for Agriculture and Trade Policy, in Minneapolis, which received a $50,000 grant last year to help support family farming and rural communities.

The institute received about $2.8-million last year from about 80 grant makers, said its president, Mark Ritchie, so the loss of the Turner money will not jeopardize its programs. “Our board many years ago took the position that we needed to be very diversified, which included raising money from a wide variety of sources, and never be dependent on any single source,” Mr. Ritchie said. But he regrets the decline in resources at not only Turner but many other foundations as well.

“My sadness about this is about how it will slow cutting-edge work in rural agriculture, which isn’t as mainstream and well-supported as some other areas,” he said. “The fuel that comes from new organizations, new projects, and new initiatives getting started will take a big hit in this period, because foundations themselves are basically saying, We’re not accepting new proposals.”

If foundation support for nonprofit work were to diminish substantially, Mr. Ritchie predicted, several major consequences could occur. Organizations might have to freeze hiring, which would mean fewer openings for young people, who often bring new perspectives and ideas that keep groups rejuvenated. And nonprofit groups would also tend to delay upgrading their technological capabilities.

“However long this goes on, we will have a period of missing some cutting-edge new developments,” said Mr. Ritchie.

Building Effective Charities

The ebb in Packard’s resources, meanwhile, will slow the development of a network of organizations devoted to improving the effectiveness of nonprofit activities, some observers fear.

“The major blow is to the major local, regional, and national infrastructure organizations” like BoardSource, GuideStar, and the National Committee for Responsive Philanthropy, said Kathleen Enright, executive director of Grantmakers for Effective Organizations, a group of more than 560 grant makers committed to making nonprofit organizations more effective.

“Only a handful of funders provide support to those organizations.”

Packard has been a key player in the movement to help nonprofit groups become more effective by providing various kinds of help in addition to money. Grantmakers for Effective Organizations was hatched in its office in Los Altos, Calif., though it is now based in Washington. The foundation will continue that effort with its own grantees, Ms. Enright is confident, but will have less of an impact more generally.

In an effort to avoid duplication, she said, Grantmakers for Effective Organizations will be merging with the Grantmakers Evaluation Network, which comprises foundation staff members interested in developing evaluation in philanthropy. That measure should result in some savings. Her organization’s budget is $750,000 this year, of which $75,000 came from Packard.

‘A Very Big Effect’

Many Americans remain both wealthy and philanthropic, of course, and organizations that lose some grants focus on finding replacements. But doing so is seldom easy.

“There’s no way, from my microperspective, to know what’s the total cumulative situation,” Mr. Ritchie said. “People are still dying and leaving wills. But in day-to-day life you have certain funders you’re dependent on, and you have a narrow view of where you can get money. So that’s why these cutbacks have a very big effect.”

Even in a recession the fortunes of individual foundations wax and wane. The Global Fund for Women, for example, learned this summer that the Bill & Melinda Gates Foundation, which has largely untethered its endowment from the stock market, would be doubling its grant for general support — to $1-million over two years.

What’s more, the Atlantic Philanthropies is increasing its grant making, thanks to a recent decision to give away all its money in the next 15 years or so rather than seek a permanent existence.

The foundation, which has offices in New York as well as Bermuda, England, Ireland, Northern Ireland, and South Africa, plans to give away roughly $400-million a year, compared with about $333-million last year. Its endowment is currently about $3.7-billion.

In its 20 years of existence, the foundation has given away some $2.5-billion, mostly for higher education. Its board is now refocusing its strategy and will probably support work in aging, disadvantaged children and youth, public health, human rights, and peace and reconciliation, while phasing out support for education and improving nonprofit organizations.